LEAD: EU expands to 25-state union, largest trading bloc

Asian Economic News, May 3, 2004

BRUSSELS, May 1 Kyodo

(EDS: UPDATING)

With a blaze of fireworks and street celebrations featuring champagne, the European Union celebrated its largest one-time expansion to a 25-nation family Saturday, creating the world's largest single trading bloc with a population of 450 million.

The accession into the European Union of Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia marked the further unification of Europe as most of the 10 newcomers are former communist states.

People gathered for concerts, border ceremonies and outdoor parties from the Baltic to the Atlantic to the Mediterranean as EU leaders celebrated the disappearance of Europe's east-west divide 15 years after the collapse of the Berlin Wall.

''Today we welcome into the EU family 10 new member countries and 75 million new EU citizens,'' European Commission President Romano Prodi said.

''Five decades after our great project of European integration began, the divisions of the Cold War are gone once and for all and we live in a united Europe,'' Prodi said in a statement.

The enlargement increased the population of the European Union by 20 percent to 450 million, much bigger than the U.S. population of 290 million, and its combined gross domestic product comes to $9.05 trillion, ranking with the U.S. GDP of $10.4 trillion.

The enlargement was the European Union's fifth and the largest since the European Coal and Steel Community, the prototype of the bloc, was established in 1952.

Despite the sharp population growth, the inclusion of the 10 countries lifted the European Union's GDP by a mere 5 percent. But the European Commission said the 10 have growth potential, forecasting their real GDP will grow an average 4.1 percent in 2004 and 4.4 percent in 2005, more than the 1.9 percent in 2004 and 2.3 percent in 2005 projected for the 15 older member states.

Development funds from the European Union and greater investment from richer countries are expected to stimulate the economies of the 10 nations.

Many EU officials see the enlargement as a great opportunity for the Brussels-based supranational organization to exert stronger influence in global affairs.

''In issues like the Middle East peace process, the European Union will carry more weight in discussions,'' EU spokesman Reijo Kemppinen said Friday.

But Kemppinen said that how much the European Union can strengthen its presence on the global stage will depend on how united the member states can be in drafting an envisaged EU constitution.

Despite the overall optimism expressed by policymakers over the enlarged bloc, there are voices of concern among the public in Western Europe that poorer new members may threaten their jobs and cause other problems.

Poorer Eastern Europeans are drawn to Western Europe for better-paying jobs in light of the large gap in economic power. Poland's per capita GDP stands at 5,290 euros, compared with Germany's 25,590 euros and Luxembourg's 50,190 euros, according to the European Commission.

Dutch farmers have voiced fears that their competitiveness might weaken if Poland, a major farming country, gets large EU agricultural subsidies.

A former top EU official has also expressed pessimism.

''The new member states are welcome, but the European house is not ready,'' former EU Commissioner for Competition Karel Van Miert told the Belgian daily De Standaard.

He said the EU leadership lacks vision and the body has political and institutional problems that can paralyze the economy.

''I see important conflicts taking place in the future about financing, among others,'' Van Miert said. ''The enlargement will be a difficult task.''